Treasurer’s office outlines plan to buy and erase up to $100 million in older medical debt

The treasurer’s office told the Senate Economic Development, Housing & General Affairs Committee on Thursday that it is pursuing a partnership with the nonprofit Undue Medical Debt to purchase and erase older medical debt held by moderate- and low-income Vermonters. The office said it would seek a one-time reappropriation of $1,000,000 that Undue could use to negotiate purchase of roughly $100,000,000 in eligible debt.

The proposal, as described by Becky Washington, director of financial empowerment in the treasurer’s office, would target medical debt between about 18 months and seven years old. Undue, the treasurer’s office said, purchases aged medical debt at a steep discount and then forgives it for affected individuals. “It’s huge. Huge impact for relatively modest money,” Washington said, describing the expected return on the requested appropriation.

Why it matters: the office said aged medical debt can impair credit, raise borrowing costs and deter people from seeking timely care. Officials cited Undue’s national track record, saying the nonprofit has retired medical debt at scale and that several other states and counties have implemented similar public–private partnerships.

What the treasurer’s office reported: Undue provided an estimate that up to $100,000,000 of Vermont medical debt could be eligible for purchase under its standard eligibility rules, which the office said would affect on the order of “60,000” Vermonters. The office described a typical eligibility screen that considers income (the program would prioritize households at or below 400% of the federal poverty level and those with medical bills exceeding a set share of income) and the age of the debt. Undue will negotiate file-by-file with hospitals and other providers and notify individuals automatically if their debt is eliminated; individuals do not apply to participate.

Funding context: the treasurer’s office proposed reappropriating $1,000,000 that had been included in a prior $20,000,000 appropriation intended to buy down state bonds. Officials said each $1,000,000 applied to bond buydown would yield roughly $50,000 in lifetime savings on state debt service, and argued the $1,000,000 reappropriation for medical debt would deliver larger community benefit by enabling purchase of a much larger face value of debt.

Limitations and program design notes: the office said the proposal is meant as a one-time forgiveness program to reduce moral hazard. Officials described the model as purchasing older, hard-to-collect medical debt that providers may be willing to sell or donate; some providers may accept purchase payments, some may donate accounts. The treasurer’s office emphasized the program’s administrative structure would rely on Undue to negotiate with providers and handle notifications; the state would provide oversight and the one-time appropriation. Washington added that the office expects the program to launch after further legislative action and administrative set-up, not immediately.

Questions and next steps: senators pressed for detail on how many Vermonters the $1,000,000 would actually reach, how providers would be prioritized, and whether the program could create market signals that would discourage future collections. The treasurer’s office responded that the model addresses moral-hazard concerns by focusing on older, already-collected accounts and by designing the proposal as a one-time reset rather than an ongoing program. The office said further legislative language and an appropriation would be required before any purchases occur.

Ending: the committee invited the treasurer’s office to return with more detailed fiscal and operational language and emphasized the need for clear statutory limits and reporting if the Legislature moves forward.